![Empire-builders and shirkers: Investment, firm performance, and managerial incentives [An article from: Journal of Corporate Finance]](https://www.ebooknetworking.net/books/B00/0RR/bigB000RR9R9Q.jpg)
Empire-builders and shirkers: Investment, firm performance, and managerial incentives [An article from: Journal of Corporate Finance]
Book Details
Author(s)R.K. Aggarwal, A.A. Samwick
PublisherElsevier
ISBN / ASINB000RR9R9Q
ISBN-13978B000RR9R98
MarketplaceFrance 🇫🇷
Description
This digital document is a journal article from Journal of Corporate Finance, published by Elsevier in 2006. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.
Description:
We consider the equilibrium relationships between incentives from compensation, investment, and firm performance. In an optimal contracting model, we show that the relationship between firm performance and managerial incentives, in isolation, is insufficient to identify whether managers have private benefits of investment, as in theories of managerial entrenchment. We estimate the joint relationships between incentives and firm performance and between incentives and investment. We provide new results showing that investment is increasing in incentives. Further, in contrast to previous studies, we find that firm performance is increasing in incentives at all levels of incentives. Taken together, these results are inconsistent with theories of overinvestment based on managers having private benefits of investment. These results are consistent with managers having private costs of investment and, more generally, models of underinvestment.
Description:
We consider the equilibrium relationships between incentives from compensation, investment, and firm performance. In an optimal contracting model, we show that the relationship between firm performance and managerial incentives, in isolation, is insufficient to identify whether managers have private benefits of investment, as in theories of managerial entrenchment. We estimate the joint relationships between incentives and firm performance and between incentives and investment. We provide new results showing that investment is increasing in incentives. Further, in contrast to previous studies, we find that firm performance is increasing in incentives at all levels of incentives. Taken together, these results are inconsistent with theories of overinvestment based on managers having private benefits of investment. These results are consistent with managers having private costs of investment and, more generally, models of underinvestment.
